Suicides spike as Europe’s economy crumbles

The meltdown of the European economy has been linked to rising suicide rates of workers who see no escape from their plight.

Barbie Latza Nadeau reports for Newsweek (link here) on increasing suicide rates in countries such as Italy, Greece, Spain, and Ireland — all of which are in the throes of severe economic crises. She observes that “(i)n the countries most affected by the euro-zone crisis, depression is on the rise and suicides are spreading.” In addition, amid widespread unemployment in these countries, governments are cutting back on social support services for the jobless and those in need of assistance:

“The main reason for the rise in suicides is the recession and now austerity—both making hard times more difficult and reducing funding for mental-health services,” says David Stuckler, a Cambridge professor who coauthored a report on the health effects of the economic crisis in Europe. “Usually an epidemic is thought of as a short-term increase in a disease—by that criterion, suicides would be an epidemic.”

Nadeau begins her piece with three stories of three Italian workers who committed suicide due to their personal financial struggles. I suggest checking it out if you want a clearer sense of the human costs of this recession.

Cutting back when the need is greatest

Austerity can be a sound philosophy and practice when you need to cut back on spending, and surely many individuals and organizations manage to do so when times are tough. But in this context, austerity has meant sharp cuts in government support of those who most need assistance, including social services to help people who are struggling with life’s harsh challenges.

When America faced the Great Depression of the 1930s, the federal government enacted the New Deal legislation that created a stronger social safety net, including the minimum wage, Social Security, and public insurance for our bank accounts. Ironically, it was this influx of government spending, followed by the huge increase in public expenditures necessary to fight the Second World War, that saved capitalism and put America on path for its greatest era of prosperity.

The European economy today is different from that of the U.S. during the 1930s, but the point about government support is no less relevant. When people have nowhere to turn, some choose the most terrible option.

On suicide

It pains me that suicide comes up so often in discussions of depression, desperation, and despair related to work and livelihood. Before I began to understand the psychological impact of work and the economy, I did not comprehend how severe setbacks and traumatic experiences linked to employment (or lack thereof) might be related to suicide.

I get it now. The increasing suicide rate in Europe is horrific in itself, as well as the canary in the coal mine. We must pay attention.

Retirement expert: “Most middle-class Americans will become poor or near-poor retirees”

According to economist Teresa Ghilarducci, one of the nation’s leading experts on retirement policy, “(i)t looks like most middle-class Americans will become poor or near-poor retirees,” adding that “(t)he baby boomers will be the first generation that will do worse in retirement than their parents.”

Ghilarducci’s comments appear in The Week, a weekly news magazine, as part of an informative piece (“The not-so-golden years,” April 27 edition) spotlighting a largely neglected Boomer retirement savings crisis that has grave implications for America’s social and economic well-being.

401(k)s vs. pensions

While the economic meltdown is one reason for this crisis, the more systemic cause is the disappearance of the traditional pension plan. The Week reports that from 1980 to 2006, the percentage of private-sector workers with employer-funded pension plans dropped from 60 percent to 10 percent. The 401(k) plan — voluntary and largely employee-funded — would replace the pension as the primary retirement savings vehicle.

Unfortunately, most workers have not built 401(k) accounts sufficient to fund a comfortable retirement; the average 401(k) balance “is just over $60,000,” according to The Week. Even worse, “(m)ore than half of U.S. workers have no retirement plan at all.” Social Security payments “averaging $14,780 a year for individuals and $22,000 for couples” won’t bridge the gaps.

Consequently, it appears that many Boomers will find themselves working much later into their lives, seeking cheaper housing, and cutting back sharply on spending.

Policy options

From a policy standpoint, there are no easy choices. Below are two possibilities; the first is something of a pipe dream for now, the second is more politically viable.

Public pensions for all?

In an earlier New York Times op-ed piece in response to cutbacks in New York State’s pension plan for public workers, Ghilarducci calls upon the states to create public pension plans for all workers:

Rather than curtailing public and private pensions, New York and other states could save millions of workers from impending poverty by creating public pensions for everyone.

While the recession bears some blame for the looming retirement crisis, experts agree that the primary cause is more fundamental: Most workers do not have retirement accounts at work.

Shoring up Social Security

At the very least, we need to ensure the viability of Social Security for generations to come. The anticipated shortfalls in the Social Security fund can be addressed by raising the current cap on payroll taxes that fund the system.

Currently workers pay a flat 6.2 percent in payroll taxes, but that tax caps out on the first $106,800 of income. Eliminating or raising the cap would go a long way toward keeping the Social Security fund in decent shape in terms of paying out promised benefits.

The other option for Social Security is means testing, which would reduce or eliminate benefits for the most economically fortunate. The politics of this possibility will certainly push the “class warfare” buttons, but it wouldn’t surprise me to see proposals enter the picture as the crisis becomes more evident.

Generations at war?

In addition, there’s a potential political war looming in the not-so-far distance, one between the Boomers now facing a bleak retirement and younger generations trying to get their starts in life.

It is fair, for example, to ask people entering the workforce and starting a career to bail out their elders, while facing a brutal job market and carrying enormous amounts of student debt? As I wrote in this short article two years ago, generational battles over taxation and public spending may become ugly and divisive.

No quick fixes

Also, this won’t be solved by older Boomers suddenly deciding to save more, even assuming they are in a position to do so. Retirement funds are built by accruing returns on principal over time, and five or even ten years isn’t a sufficient period to do so, especially at a time of declining rates.

In addition to the individual burdens, the economic ripple effects of so many Boomers going into spending lock-down mode will be significant. What happens when a generation that built an economy based on credit and consumption suddenly puts on the brakes by sheer necessity? We may be about a decade away from finding out.

Folks, it’s not a pretty picture, but I won’t apologize for sounding like a broken record about it in the pages of this blog. It’s a crisis we’d better face earlier than later.

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The full print version of The Week article is not available online, but a shorter version along with other pieces on the retirement crisis can be accessed here.

For more articles from this blog related to retirement readiness, Social Security, public pensions, and the economy, go here.

Evidence of economic inequality keeps piling up

Class warfare is a reality, and it is being visited upon the middle class and the poor. The dots keep connecting over and again, and it’s important to see how data, politics, and public policy interact:

The Poor

Whether using a traditional or new measure for gauging poverty, over 15 percent of Americans are officially poor, reports CNN’s Tami Luhby (link here):

There were more than 49 million Americans living in poverty in 2010, under an alternative measure released by the Census Bureau Monday.

That’s 16% of the nation, higher than the official poverty rate of 15.2%. The official rate, released in September, showed 46.6 million people living in poverty.

The new measure “includes various government benefits and expenses not captured by the official poverty rate.”

The Near Poor

There are millions more living on the brink. Jason DeParle, Robert Gebeloff, and Sabrina Tavernise report for New York Times (link here) on a significant group of Americans classified as “near poor”:

They drive cars, but seldom new ones. They earn paychecks, but not big ones. Many own homes. Most pay taxes. Half are married, and nearly half live in the suburbs. None are poor, but many describe themselves as barely scraping by.

New U.S. Census methods for calculating poverty label the near poor as those with less than 50 percent above the poverty line:

Perhaps the most startling differences between the old measure and the new involves data the government has not yet published, showing 51 million people with incomes less than 50 percent above the poverty line.

They conclude: “All told, that places 100 million people — one in three Americans — either in poverty or in the fretful zone just above it.”

The Shrinking Middle

Lucia Mutikani reports for Reuters (link here) on a Stanford University study of 117 metro areas, finding that middle-class neighborhoods are shrinking:

The share of families living in middle-income neighborhoods has dropped to 44 percent in 2007 from 65 percent in 1970, the Stanford University study showed.

. . . The study found that the proportion of families living in affluent neighborhoods doubled to 14 percent in 2007 from 7 percent in 1970.

During the same period, the share of families in poor residential areas increased to 17 percent from 8 percent.

The Expanding 0.1 Percent

Robert Lenzner, writing for Forbes (via Yahoo! News, here), explains that the top 0.1 percent receive roughly half of the capital gains, thus pointing to Bush-era capital gains tax cuts as chief culprits in benefiting America’s wealthiest:

Capital gains are the key ingredient of income disparity in the US– and the force behind the winner takes all mantra of our economic system. . . .

Income and wealth disparities become even more  absurd  if we look at the top 0.1% of the nation’s earners — rather than the more common 1%. The top 0.1% —  about 315,000 individuals out of 315 million — are making about half of all capital gains on the sale of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400.

It’s crystal clear that the Bush tax reduction on capital gains and dividend income in 2003 was the cutting edge policy that has created the immense increase in net worth of corporate executives, Wall St. professionals and other entrepreneurs.

The impact on economic recovery

Even Business Week understands that widening inequality makes genuine economic recovery even harder, as David Lynch writes (link here):

The public discussion about the widening gap between rich and poor hasn’t been this loud since the Great Depression. . . . What many are missing is the actual impact rising inequality is having on the U.S. economy. Hint: It isn’t good.

. . . Thus the growing chasm in the U.S. between the haves and the have-nots has serious consequences. Societies that manage a narrower gap between rich and poor enjoy longer economic expansions, according to research published this year by the International Monetary Fund.

. . . Expansions fizzle sooner in less equal societies because they are more vulnerable to both financial crises and political instability.

Discrediting the messengers

Occupy Wall Street has spawned a nationwide (nay, worldwide) movement protesting this massive inequality. Thus, it’s no wonder that efforts are underway to discredit the movement. For example, Jonathan Larsen and Ken Olshansky report for MSNBC (link here) on a major lobbying firm that wants to take on the Occupiers, but only if the price is right:

A well-known Washington lobbying firm with links to the financial industry has proposed an $850,000 plan to take on Occupy Wall Street and politicians who might express sympathy for the protests, according to a memo obtained by the MSNBC program “Up w/ Chris Hayes.”

The proposal was written on the letterhead of the lobbying firm Clark Lytle Geduldig & Cranford and addressed to one of CLGC’s clients, the American Bankers Association.

CLGC’s memo proposes that the ABA pay CLGC $850,000 to conduct “opposition research” on Occupy Wall Street in order to construct “negative narratives” about the protests and allied politicians.

Stay alert

These are defining dynamics of our age. When will we get it, and when we will do something about it?

The view from Ohio: Voters repeal harsh labor restrictions, but desperate times endure

The anti-labor fervor generated from Wisconsin earlier this year came to a decisive halt in Ohio on Tuesday, as Buckeye State voters overwhelmingly repealed a law that severely restricted public employee collective bargaining rights.

As reported by Sabrina Tavernise for the New York Times (link here):

A year after Republicans swept legislatures across the country, voters in Ohio delivered their verdict on a centerpiece of the conservative legislative agenda, striking down a law that restricted public workers’ rights to bargain collectively.

The landslide vote to repeal the bill — 62 percent to 38 percent, according to preliminary results from Ohio’s secretary of state — was a slap to Ohio’s governor, John R. Kasich, a prominent Republican who had championed the law as a tool for cities to cut costs. The bill passed in March on a wave of enthusiasm among Republicans fresh from victories at the polls.

Middle class tears and anxiety

Mother Jones Nov-Dec issue

The Ohio vote is a welcomed and dramatic response to the virulent attack on labor that has spread throughout much of the Midwest this year. Like the Occupy Wall Street movement, it may signal a much-needed public awakening about who is responsible for the continuing effects of the economic meltdown.

In the meantime, however, there is much desperation in Ohio, as everyday workers and their families struggle to keep their heads above water. For a vivid picture of what these folks are up against, please read Mac McClelland’s excellent “Ohio’s War on the Middle Class” in the current issue of Mother Jones magazine (link here). McClelland previews his piece:

Wherein I go home, watch public servants get axed, visit the warehouse of unbearable sorrow, hang with jobless thirtysomethings living in abandoned homes, and consider whether my generation is flat-out screwed.

McClelland is the human rights editor for the magazine, and he returned to his native Ohio to spend time with old classmates and friends. His purpose was to learn about the challenges they face in today’s economy, and the stories are heartbreaking and revealing. It’s one of the best profiles of how middle class America is disintegrating before our very eyes.

Cheer the voter slapdown of Ohio’s anti-worker legislation, but read McClelland’s piece in Mother Jones to find out what’s still at stake.

Our low “spirit level”: America ranks 27th out of 31 nations in global social justice study

Based on measures of social justice, America ranks 27th among 31 member nations of the Organization for Economic Co-Operation and Development (OECD), according to “Social Justice in the OECD — How Do the Member States Compare?,” a report released last week by Bertelsmann Stiftung, a private German foundation.

Here are some of the low points for the U.S. in the report:

  • 28th in income inequality
  • 29th in poverty prevention
  • 28th in child poverty
  • 22nd in unemployment and long-term unemployment
  • 20th in access to education
  • 23rd in health care
  • 25th in debt levels

In no category does the U.S. place in the higher ranks.

Overall, the four nations ranked immediately above the U.S. are Portugal, Slovakia, South Korea, and Spain. Only Greece, Chile, Mexico, and Turkey rank below the U.S.

“We should be ashamed”

New York Times columnist Charles M. Blow references the study and writes:

We have not taken care of the least among us. We have allowed a revolting level of income inequality to develop. We have watched as millions of our fellow countrymen have fallen into poverty. And we have done a poor job of educating our children and now threaten to leave them a country that is a shell of its former self. We should be ashamed.

The Times also prepared an excellent graphic that highlights selected measures in the report. The full report is only 50+ pages, with lots of easy-to-read charts and summaries.

America’s “spirit level”

In The Spirit Level: Why Greater Equality Makes Societies Stronger (rev. ed. 2010), British epidemiologists Richard Wilkinson and Kate Pickett examined comparative economic and social data and found that social and health problems worsen as inequality grows.

In fact, overall wealth is less predictive than distribution of wealth in forecasting the well-being of a populace. In terms of public health, they found that while the poor are the biggest beneficiaries of greater equality, the wealthy make gains as well. Here’s a short YouTube video of Wilkinson and Pickett explaining their book:

The U.S. fares poorly in The Spirit Level as well, mirroring the findings of the OECD study.

Conclusion

What else is there to say? America, we’ve got our work cut out for us.

America’s middle class shrinks as poverty expands: Articles worth reading

America’s middle class is in sharp decline, and many people are falling into a state of poverty. For readers who have the time and inclination, it’s worth reading up on some of the commentary about the economic times in which we live.

I’ve gathered and excerpted news reports and analyses from assorted newspapers, periodicals, and online sites, representing varied economic and political perspectives. While they may not be in agreement on the solutions, they share a sense of alarm over jobs, the economy, and growing inequality.

“Soaring Poverty Casts Spotlight on ‘Lost Decade’,” Sabrina Tavernise for the New York Times

Sabrina Tavernise reports on the latest economic census data (link here):

Another 2.6 million people slipped into poverty in the United States last year, the Census Bureau reported Tuesday, and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it.

…Economists pointed to a telling statistic: It was the first time since the Great Depression that median household income, adjusted for inflation, had not risen over such a long period, said Lawrence Katz, an economics professor at Harvard.

“This is truly a lost decade,” Mr. Katz said. “We think of America as a place where every generation is doing better, but we’re looking at a period when the median family is in worse shape than it was in the late 1990s.”

“Middle Class Death Watch — 33 Frightening Economic Developments,” David DeGraw for AlterNet

David DeGraw pulls together an assortment of economic trends and data (link here) that illustrate our perilous times. Here are 1o of them:

  • “More Americans ‘double up’ and share homes in tough economy”
  • “There’s No Bottom In Sight For Plummeting Home Prices”
  • “Unemployed face tough competition: underemployed”
  • “A smaller share of men have jobs today than at any time since World War II”
  • “U.S. Consumers’ Credit Card Debt Rapidly Increasing”
  • “Student Loan Default Rates Rise Sharply in Past Year”
  • “Food prices stay near record high”
  • “Median Male Worker Makes Less Now Than 43 Years Ago – Women Make 65% of what Median Male Makes”
  • “Analysis: $35 trillion pension funds in new crisis as deficit hole grows”
  • “Number of uninsured climbs to highest figure since passage of Medicare, Medicaid”

“Beyond the poverty numbers: real lives, real pain,” David Crary for the Associated Press

The AP’s David Crary brings together the work of a team of reporters who traveled the nation in search of stories depicting the impact of the economic meltdown (link here, via San Francisco Chronicle), and in the lede he opens with one of them:

At a food pantry in a Chicago suburb, a 38-year-old mother of two breaks into tears.

She and her husband have been out of work for nearly two years. Their house and car are gone. So is their foothold in the middle class and, at times, their self-esteem.

“It’s like there is no way out,” says Kris Fallon.

Unfortunately, hard times apparently aren’t making us a kinder, gentler nation:

The Pew Research Center said its recent polling shows that a majority of Americans — for the first time in 15 years of being surveyed on the question — oppose more government spending to help the poor.

“Can the Middle Class Be Saved?,” Don Peck for The Atlantic

Don Peck, author of Pinched: How the Great Recession Has Narrowed Our Future & What We Can Do About It (2011), notes that, on the whole, America’s wealthiest have done OK during the meltdown (link here):

It’s hard to miss just how unevenly the Great Recession has affected different classes of people in different places. From 2009 to 2010, wages were essentially flat nationwide—but they grew by 11.9 percent in Manhattan and 8.7 percent in Silicon Valley. . . . In Miami and Detroit, by contrast, for every job posting, six people were unemployed. In March, the national unemployment rate was 12 percent for people with only a high-school diploma, 4.5 percent for college grads, and 2 percent for those with a professional degree.

Peck acknowledges that the “post-war decades of the 20th century were unusually hospitable to the American middle class.” That has changed significantly, he observes, especially for those whose education and experience place them outside of America’s professional ranks:

The strongest forces of our time are naturally divisive; absent a wide-ranging effort to constrain them, economic and cultural polarization will almost surely continue. Perhaps the nonprofessional middle class is rich enough today to absorb its blows with equanimity. Perhaps plutonomy, in the 21st century, will prove stable over the long run.

But few Americans, no matter their class, will be eager for that outcome.

“The President’s Bold Jobs Bill (Maybe),” Robert Reich on RobertReich.org 

In August, former Secretary of Labor Robert Reich called for an ambitious jobs program to revive the economy and get people back to work (link here). He summarized recent developments this way:

Combine the budget cuts state and local governments continue to make with the slowdown in consumer spending, the reluctance of businesses to expand or hire, and the magnitude of unemployment and under-employment, and you need a big new booster rocket.

He offered a list of recommendations that included the following, some of which have appeared, more or less, in the President’s “American Jobs Act”:

1. Exempt first $20K of income from payroll taxes for two years. Make up shortfall by raising ceiling on income subject to payroll taxes.

2. Recreate the WPA and Civilian Conservation Corps to put long-term unemployed directly to work.

3. Create an infrastructure bank authorized to borrow $300 billion a year to repair and upgrade the nation’s roads, bridges, ports, airports, school buildings, and water and sewer systems.

“The great mismatch: Special report on the future of jobs,” Matthew Bishop for The Economist

Matthew Bishop, in a wide-ranging survey linking jobs and the economy (link here), closes by identifying responses that mix education & training, less government regulation, direct subsidies & health care for workers:

The mismatch between the skills demanded by employers and those available in the market is a reflection both of bad choices by students, who have not thought hard enough about what will help them find a good job, and of education systems that are too often indifferent to the needs of the labour market and too slow to change even if they try.

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A second challenge is for governments to create the right conditions for businesses to create more jobs. That means running sustainable macroeconomic policies…; sensible regulation; and a tax system that is both competitive, with low marginal rates, and does not distort business decisions in arbitrary ways.

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Long-term unemployment often turns into permanent unemployment, so governments should aim to keep people in work, even if that sometimes means continuing to pay them benefits as they work. Health care and pension systems should be (re-)designed to allow workers as much flexibility as possible, not least in deciding when to retire.

“Does Retraining Give the Unemployed a Second Chance?,” Drake Bennett for Business Week 

Drake Bennett examines the role of retraining programs in matching unemployed workers with available jobs (link here):

Even with 14 million Americans looking for work—and at least 2.6 million wanting work but not actively searching—jobs are going unfilled. The Bureau of Labor Statistics puts the total number of openings at 3.2 million, and despite the flood of applicants, companies sometimes struggle to find candidates that fit.

Some claim that job training puts the onus on the individual worker for not having the right skills or education. However, notes Bennett:

The response to this, from the teachers, companies, and politicians who run and support training programs—and from some of the job seekers who put their faith in them—is that the case for training is only partly about the current bleak employment picture. It’s also about preparing for the sort of jobs the economy will add when it finally recovers and equipping students with skills that are rarely, if ever, taught in today’s classrooms.

Rank-and-file economics: Fighting for a wage- and jobs-led economy,” Katherine Sciacchitano for Dollars & Sense 

Labor educator and lawyer Katherine Sciacchitano (link here) introduces her piece with a short Q&A:

Riddle 1: When is a recovery not a recovery?
Answer: When profits are at record levels, corporations are sitting on $1.7 trillion in cash, and unemployment is still at 9.2% and rising.

Riddle 2: When is a stimulus not a stimulus?
Answer: When it’s less than one-fourth the size of the hole in the economy it is intended to fill.

Riddle 3: When will it be possible to rebuild the economy?
Answer: When the U.S. labor movement joins with community and international labor allies to demand global economic development, jobs, and rising wages.

She posits that in order to forge a resurgent labor movement, we need to unlearn what we have been taught about free market economic policies:

The hard part will be unlearning the indoctrination we’ve received about the crisis, the role of government in the economy, and the free market. Once we do that, we can build successful movements at home and abroad. We’re closer than we think to the army of rank-and-file economists that we need.

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Related posts

New jobs, new economy: Envisioning better ways to work and earn a living

Plutocracy in America: A term for our times

When Boomers retire (or try to): America’s coming train wreck

Jobs, Unemployment, and the Great Recession: Articles Worth Reading

“How much is enough?”

The cover of the Summer 2011 issue of the World Policy Journal asks plainly: How much is enough?

The environment

In one of the lead essays (link here), environmentalist William Powers — a one-time child of relative privilege from Long Island — answers the question from an environmental perspective:

This conversation is vitally important because of some bad news. Technology alone won’t save us from environmental collapse. It will take four or five generations of technological innovation to achieve carbon-free production. Alas, we don’t have that much time.

He takes aim at his own upbringing in assessing the problem:

The price of my privileged upbringing was my ignorance of the true effects of global hyper-development…. I was taught to see myself as a child of the American Dream. In reality, I am a child of the Age of Ecocide.

Powers has chosen to embrace voluntary simplicity as a response to this crisis, as well as to become socially engaged in environmental advocacy.

A dollar a day

Voluntary simplicity may sound good, but for many, simplicity is not a choice. As Mira Kamdar, examining the wide wealth gap in India, states (link here):

Voluntary simplicity can only appeal to those who have enough to choose to live with less. For those who live in a one-room shack without electricity because they have no other choice, a simple lifestyle is a life of deprivation.

Kamdar points out that, amidst brazen conspicuous consumption in India, some “800 million people still live on less than a dollar a day.”

Emerging age of scarcity

I believe that most of us will be facing this question sooner than later, if we have not already. In a 2010 piece for The Futurist (membership magazine of the World Future Society), Stephen Aguilar-Millan, Ann Feeney, Amy Oberg, and Elizabeth Rudd painted a bracing view of economic life between now and 2050:

The world economy will experience scarcities of natural resources from now until the middle of the twenty-first century, when a post-scarcity world becomes a reality….The world between 2010 and 2050 is likely to be characterized by scarcities: a scarcity of credit, a scarcity of food, a scarcity of energy, a scarcity of water, and a scarcity of mineral resources.

How much is enough?

Americans who came of age in the late 20th century are not used to acknowledging lasting, systemic downward cycles in material wealth and resources. Well, forgive me for sounding like a naysayer, but I believe that age of scarcity is upon us, even if we have yet to acknowledge it. The question of how much is enough will have increasing relevance in our lives.

For the have-nots, the question will be one of survival, as in how much do I need to sustain my life and the lives of my loved ones?

For the haves, the question will be one of personal choice and ethics, as in how much am I willing to share, donate, or be taxed in order to provide food, shelter, and clothing for others in dire need?

For the majority somewhere in the middle, the question will be fraught with insecurity and pangs of conscience, fueled by awareness that jobs and nest eggs can disappear at a moment’s notice, while recognizing that many others are much worse off.

To borrow from Thomas Paine, these will be times that try our souls.

The humane way to fix Social Security

Certain online programs should have a built-in laugh track. Chief among these are the countless “retirement savings calculators” designed to help us determine if we’re saving and investing properly for retirement.

Go ahead. Google the term and then plug in your numbers. If you’re like most of us, the results may make you cry — or laugh madly. This includes many who are gainfully employed and have contributed regularly to a 401K or an IRA.

Bottom line: Many of America’s Baby Boomers (and those of generations to follow) are woefully unprepared for retirement. I’ve been beating this drum for some time — see links to posts below — so I shall not belabor the details.

Cutting Social Security

Although these challenges are well-known, the current mantra on Capitol Hill is that we should cut Social Security benefits by reducing payouts and raising the ages for individuals to be eligible to collect.

These measures are urged because the Social Security Administration has projected that by 2019 it will be “paying more in benefits than we collect in taxes,” and by 2041 it will have sufficient funds “to pay only about 78 cents for each dollar of scheduled benefits.”

However, as other policy analysts have noted, the projected funding gap can be addressed fairly and cleanly by raising the income cap on payroll taxes. Currently the top 6 percent of income earners pay FICA only on the first $106,800 of their income. By removing the cap, the Social Security fund will be able to pay full benefits for everyone and rebuild its surplus.

How about raising Social Security?

But even a fully funded Social Security system will not be sufficient to ease the coming pain, when countless aspiring retirees look at the cold reality of a modest monthly check and sparse retirement savings.

Amidst the clamor of calls for belt-tightening, labor lawyer Thomas Geoghegan — one of our most thoughtful social and political commentators to boot — proposes raising Social Security benefits in a recent New York Times op-ed piece (link here):

…I cringe when Democrats talk of “saving” Social Security. We should not “save” it but raise it. Right now Social Security pays out 39 percent of the average worker’s preretirement earnings. While jaws may drop inside the Beltway, we could raise that to 50 percent. We’d still be near the bottom of the league of the world’s richest countries — but at least it would be a basement with some food and air.

Geoghegan is enough of a wonk to spell out how to raise the extra money, including removing the payroll tax cap, accessing estate tax revenues, and other measures.

What’s at stake

But the main message we should be sounding is what prompted Geoghegan to write in the first place, that is, the importance of providing a decent public pension to the elderly.

In 2004, conservative economist and retirement investment guru Ben Stein wrote these words in a personal finance column (link here) that have stuck with me:

It is fine to have no money when you’re young. It is not fine to have no money when you’re old. It is even fun to be poor when you’re in college or right out of it. But to be retired and in your 70’s and not know how you are going to pay your bills – that is terrifying. In fact, it’s a grotesque nightmare.

What is life like if you are old, weak, tired, not in great health, lonely and have no money? You are miserable, and you are in fear and you are gaunt on the inside.

I may not agree with Stein on many things when it comes to politics, but there is a deep ring of truth to these words. We need to harness our better natures and find a way to tackle this challenge in a humane way. A solvent and responsibly generous Social Security system can be a big part of the solution.

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Related posts:

The press discovers the coming Boomer retirement crisis

When Boomers retire (or try to): America’s coming train wreck

Is America’s Social Security system going broke?

Losing a voice, for now: Bob Herbert leaves the NY Times

New York Times columnist Bob Herbert, a passionate and compassionate voice for economic and social justice, is leaving the paper “to write a book and to expand [his] efforts on behalf of working people, the poor and others who are struggling in our society.” In his final column today, “Losing Our Way” (link here), he wrote:

So here we are pouring shiploads of cash into yet another war, this time in Libya, while simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers, and generally letting the bottom fall out of the quality of life here at home.

***

Overwhelming imbalances in wealth and income inevitably result in enormous imbalances of political power. So the corporations and the very wealthy continue to do well. The employment crisis never gets addressed. The wars never end. And nation-building never gets a foothold here at home.

New ideas and new leadership have seldom been more urgently needed.

Hopefully he’ll be back at us again soon.

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I included links to previous Herbert columns in this post, Jobs, Unemployment, and the Great Recession.

Lisa Dodson on the moral underground economy

The term “underground economy” typically suggests something irregular, perhaps even shady or illegal.

But in a piece for Yes! magazine (link here) drawn from her recent book The Moral Underground: How Ordinary Americans Subvert an Unfair Economy (2010), Boston College sociologist Lisa Dodson writes of everyday Americans who are bending or breaking the rules, fueling a “moral underground economy” to help others in need.

Class bonding, not class warfare

In researching her book, Dodson realized that she had stumbled onto an interesting phenomenon, that of middle-class people — such as mid-level managers at retail shops and local businesses — empathizing with their lower-paid co-workers and finding ways to help them out:

They found a little opening, a little chink in the system, and used it to treat working people better. Even if they had to break company rules, they were determined to treat people as though their survival mattered in a business environment that valued nothing but bottom-line profitability.

Stories

She heard stories such as these:

  • “Bea” is a big-box chain store manager who somehow ordered an “extra” prom dress for an employee who couldn’t afford to buy her daughter a prom dress.
  • “Andrew” is a manager for a food company who finds ways to pad the modest paychecks of his workers and gives them food to take home.
  • “Ned” is a grocery store worker who “detours some of the ‘product’ that doesn’t quite pass muster—dented cans, not-quite-fresh produce—to his low-wage employees.”

Going underground to survive

Of course, the very term underground economy often obscures the real motivation for working off the books or bending the rules to help people who are struggling to make ends meet: Good jobs at decent wages are in terribly short supply, and available public assistance doesn’t bridge the gaps.

The upshot of Dodson’s examination is that in a nation where minimum wage laws do not mandate a living wage, where public assistance is inadequate, and where the gap between the most and least fortunate continues to grow wider and deeper, practicing simple morality becomes a form of humanitarian civil disobedience.

***

Recent related posts:

Workers aren’t reaping the benefits of America’s productivity gains

Plutocracy in America: A term for our times

Does it boil down to the rich & powerful vs. the rest of us?

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